The January 12th edition of the Economist reported significant price increases for electricity (12.7% to 27%) and natural gas (+ 17%) coming from British electricity and gas firms.
The obvious explanation for high electricity prices results from high gas prices; 40% of Britain's power plants are gas fired.
The less obvious explanation, and more likely source of increased prices, is the malfunctioning of Britain's liberalised energy markets. Suppliers have decreased from more than 20 a decade ago to 6 currently. Additionally, firms have become vertically integrated to a much greater degree. The result of this is two-fold: one, that it has become difficult for incumbents to enter the domestic energy business; and two, the market becomes highly volitle.
On a similar note, Gordon Brown's Government finally unveiled its energy policy for Britain. The plan is centered on the controversial decision to support the building of new nuclear-powered stations.
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1 comment:
Piers, good post. Can you clarify whether it's 40% of Britain's installed capacity, or 40% of its total electricity generation (slightly different things) that is supplied by natural gas?
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